Now suppose we have a trade war. This will cut exports, which other things equal depresses the economy. But it will also cut imports, which other things equal is expansionary.Set aside the idea that a trade war, “other things equal,” would have no effect on world demand — a questionable claim (even if it comes from a Nobel laureate who assures his readers, “I really, truly know what I’m talking about”). What’s striking is that Krugman thought it more useful to attack Romney for his flawed thinking on trade than Trump for his. On the Trans-Pacific Partnership, Krugman has described himself as a “lukewarm opponent,” and has said that the case for more trade agreements is “very, very weak,” adding: And if a progressive makes it to the White House, she should devote no political capital whatsoever to such things. So much for Adam Smith.
Does economics still believe in free trade? The discipline has urged the case for open markets since its earliest days, but lately not so much. Recent research is seen as calling the faith into question. When Mitt Romney recently attacked Donald Trump for threatening a trade war that would plunge the U.S. back into recession, Paul Krugman, a leading authority on the economics of trade, assaulted Romney for his misunderstanding: